Brazil has experienced stronger-than-expected activity in certain segments of the capital market during the first few months of 2025, driven by high liquidity in fixed-income funds and some anticipated fundraising efforts aimed at avoiding potential volatility ahead of the presidential election campaigns and subsequent vote in 2026.
Although the country’s GDP growth is expected to slow this year compared with 2024, various sectors and activities remain dynamic, particularly the infrastructure sector and M&A activity.
Joaquim Marques, managing director and head of corporate & investment banking at Banco Sumitomo Mitsui Brasileiro, the Brazilian unit of Sumitomo Mitsui Banking Corporation (SMBC), and Luciana Massaad, managing director and head of debt capital markets at the institution, speak with BNamericas about the current landscape in Brazil and SMBC’s plans to expand its debt capital market offerings and underwriting capabilities to meet rising demand.
BNamericas: What is SMBC’s view of the performance of the Brazilian capital markets in the first few months of this year and the outlook for the coming months?
Massaad: The dynamics of the local debt capital markets [DCM] in 2025 have surprised us compared with expectations of modest growth and stable activity following the robust expansion seen in 2024. Nevertheless, the local DCM market is quite heated due to various factors.
There is significant liquidity in fixed-income funds, which have seen positive fundraising. On the other hand, equity funds have lost resources – which is natural in a high-interest-rate environment and with stagnant IPO activity. In this context, we’ve seen a strong shift toward fixed income.
Also, since 2025 is a pre-election year, many companies have shown concern about political uncertainties. Combined with available liquidity, several companies have anticipated their funding and capex needs by conducting early fundraising offers, which has resulted in still-attractive conditions for them.
We’ve observed that sectors like infrastructure continue to be major issuers of local DCM instruments. There is a strong government agenda around concession offerings, especially for roads, as well as for energy, gas and sanitation. In the latter, the Sanitation for All program has not been able to meet all demand, encouraging frequent issuances aimed at institutional investors. Fund liquidity remains very high, and advancing resource access continues to be strategic.
Marques: On the corporate and investment banking side, M&A activity has been quite significant.
The year began with significant operations, and we have been monitoring many transactions in the market. The bank itself was involved in the recent acquisition by a US financial sponsor of a large power and renewables company in Brazil.
The financial sponsors segment is a strategic focus for SMBC, both in Brazil and across the Americas. In addition to infrastructure and sanitation, M&A financing has gained prominence, and I would cite as examples reported by the media: the case of CCR looking to sell its airport platform, and Brookfield considering the sale of assets in the transmission segment [Quantum II].
BNamericas: Given the current high-interest-rate environment, what financial solutions are companies seeking and what does SMBC offer to companies and projects? Are specific solutions being structured to meet the local needs of companies?
Massaad: We are in a phase of approving new products to expand our DCM platform and are pursuing partnerships with banks active in the local DCM market. Our DCM business began with more traditional non-securitized products, such as debentures, commercial notes, promissory notes and financial notes [letras financeiras] issued by local financial institutions. We are now moving forward with approvals for the distribution business to access local institutional investors and, subsequently, more sophisticated securitization instruments.
We are also working on internal initiatives to allow SMBCB to provide greater and more relevant firm underwriting commitments in order to play a more meaningful role in new DCM transactions and M&A activity.
The local base interest rate, expected to remain around 15% through the end of the year, is already priced in by many players. As a result, companies are anticipating funding needs and engaging in what is known as liability management.
The rise in local interest rates means investors are highly attentive to DCM’s final compounded remuneration rate – the base rate plus the credit spread.
Therefore, any asset offering a spread above the base rate already draws investor interest, leading to the migration of capital from multi-market and equity funds to corporate fixed income and infrastructure funds. Companies with strong credit profiles are managing to raise funds with compressed or even negative spreads, offsetting the higher interest rates in their debt structures.
Some players are combining fundraising efforts with development banks and their own resources, but large issuers are still managing to achieve very competitive spreads in the local DCM markets.
Marques: What we’re seeing is that spreads are very tight, at historically low levels. Investors are focused on the final rate: if it’s more than 1% per month, that’s great. But when interest rates begin to fall, the spread should increase to maintain profitability for investors.
If we look at the big picture, the DCM market is reaching record levels this year. The difference now is that the local DCM market in Brazil has a level of sophistication, depth and liquidity far beyond what we had 10 years ago.
We now have longer-term instruments. For example, some corporate exporters are issuing cheaper CRAs [agribusiness receivables certificates], swapping into US dollars and using those dollars to repurchase their international bonds. The reality is that the domestic market is offering positive arbitrage for our clients, so we are seeing less need for them to pursue international DCM issuances at the moment.
BNamericas: What explains this positive dynamic in the local capital market, even amid domestic and international political and economic uncertainties?
Massaad: The Brazilian debt capital market has seen a substantial improvement in regulatory terms, especially regarding securitized transactions.
FIDCs [receivables investment funds), for example, are now viewed as more regulated instruments by investors. This, combined with the fact that companies prefer to issue via capital markets, has led to a higher volume of secondary market operations and helped drive market growth overall, with increased liquidity and sophistication.
Marques: The fundraising dynamics of fixed-income funds in Brazil are a key factor. These funds have posted very high net fundraising, and in a high-interest rate environment, they need to allocate those resources – this is what is driving the local DCM market. On one side, companies in Brazil currently don’t have access to the stock market via IPOs, but on the other, we have fixed-income funds with ample liquidity ready to invest in local issuances.
BNamericas: We have seen the growing interest of investment funds entering infrastructure assets and projects. Does this somehow impact or require any change in your product offerings to the market?
Marques: For SMBC, the quality of the sponsor, the client, is fundamental, whether it’s a corporate or a financial sponsor. We seek to do business with clients who have good governance and reputation, and who have the necessary resources to execute a given project. Globally, SMBC is among the largest capital allocators to financial sponsors, and we operate very actively in this segment.
Massaad: To complement what Joaquim said, that’s why we are offering products like securitizations and infrastructure debentures. Financial sponsors demand this level of sophistication and want access to new investor bases. They want to take advantage of this liquidity and diversify their sources of capital.
BNamericas: What are the impacts of the global trade war on Brazil in your perception?
Marques: First of all, I see Brazil as potentially benefiting from the current trade war.
First, because the US has a trade surplus with Brazil, which positions us more as partners than as a threat. Second, tariffs of around 10% shouldn’t materially affect Brazilian exporters. Sectors like power & utilities and infrastructure, which are focused on the domestic market, are hardly affected. As for the export sector, agribusiness will likely benefit.
In the mining sector, companies like Vale, due to their exposure to China, may experience some volatility, but overall, we are comfortable with the level of exposure in our portfolio, which is predominantly linked to agribusiness, energy, infrastructure, pulp and paper, protein and mining.
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